Bitcoin falls off a cliff again as cryptocurrency slump deepens

Cryptocurrencies dropped sharply for the second time in less than 24 hours, sinking toward a nine-month low amid concern that broader adoption of digital assets will take longer than some anticipated.

Bitcoin, the largest cryptocurrency, tumbled as much as 9.8% and was trading at $6 480, down 6.8%, as of 10:00 in New York, according to Bloomberg composite pricing. The Bloomberg Galaxy Crypto Index, a gauge of the largest digital assets, likewise pared some of an earlier decline, when it traded near the lowest level since November 2017.

Rival coins Ripple, Ether and Litecoin also slipped.

Cryptocurrency bulls who bet an expanding user base would drive up prices have faced a string of recent disappointments. Business Insider reported on Wednesday that Goldman Sachs was pulling back on near-term plans to set up a crypto trading desk. This comes after last month’s decision by US regulators to reject another round of Bitcoin exchange-traded fund proposals.

“Their name carries weight across the globe,” said Ryan Rabaglia, head trader at digital asset brokerage OSL in Hong Kong, referring to Goldman Sachs. “When people see their name, their eyes may light up, and they say: OK, we’ve finally made it - the bigger players are going to start to enter.”

At the same time, enthusiasts drawn to Bitcoin’s original promise of anonymity and freedom from government control were also dealt a blow on Tuesday when veteran Erik Voorhees’s trading platform ShapeShift said it will begin asking users for personal information.

Regulatory scrutiny over cryptocurrency trading platforms has grown along with usage amid concerns over money laundering and customer protection. ShapeShift’s move is a sign of the growing formalisation of a market initially known for its libertarian bent.

Imposing mandatory Know Your Customer procedures is “not something we want to do” and a “heavy decision done to derisk under duress,” CEO Voorhees said on Twitter.

To clarify, the Membership program and the FOX token are systems we wanted to build for our users. The imposition of mandatory KYC within that Membership program is not something we want to do, nor something any user wants. It's a heavy decision done to derisk under duress.

While the decision may dispel users that prioritise anonymity, it may also help ShapeShift attract users that trade larger amounts of funds that tend to prefer regulated venues, said Vijay Ayyar, the Singapore-based head of business development at Luno, a cryptocurrency exchange.

“Regulators are never going to be OK with not knowing the identities of who’s doing what and who’s buying crypto,” Ayyar said.

While many banks and institutional investors are dipping their toes into the world of cryptocurrencies, concerns over everything from market manipulation to regulatory uncertainty have prevented institutional adoption.

On Friday, finance ministers from the European Union’s 28 member states are scheduled to discuss the challenges posed by the growing popularity of digital assets and whether rules should be tightened.

The market value of virtual currencies tracked by CoinMarketCap.com has slumped about 75% from its January peak to about $205bn.

The next key level to watch for Bitcoin is $5 000, according to Stephen Innes, head of trading for Asia Pacific at Oanda, who said a drop below that threshold may cause losses to accelerate.